Former Air India bidder emerges as TruJet's saviour
The funds raised through an FDI of 49% in the company would be utilised to expand TruJet's operations across India
After having to drop out of the race to acquire Air India, US-based investment firm Interups now eyes regional carrier TruJet. The firm, led by NRI chartered accountant turned businessman Laxmi Prasad, has agreed to buy a 49% stake in Turbo Megha Airways (TruJet).
According to KV Pradeep, Group Director, Megha Engineering and Infrastructures Limited (MEIL), the funds raised through foreign direct investment (FDI) of 49% in the company would be utilised to expand TruJet's operations across India and explore newer avenues in the civil aviation sector, The Economic Times reported. Pradeep added that the final amount would be decided later.
According to the TruJet website, the airline, which is owned by MEIL, currently operates to 19 destinations in the country, including Tier-2 cities. The airline flies on an all-ATR fleet and has five ATR-72 aircraft at present. It had been operating seven ATR planes. However, five of them were grounded by lessors last year over non-payment of dues by TruJet after the Covid-19 pandemic affected the airline's operations, The Hindu Business Line reported.
TruJet launched commercial operations on July 12, 2015, connecting its Hyderabad hub with pilgrimage centre Tirupati. The airline, owned by Telugu actor and actor-politician Chiranjeevi's son Ram Charan Teja, aimed to connect places primarily in Andhra Pradesh and Telangana, catering to pilgrims and economy passengers travelling to centres like Tirupati and Vijayawada. The airline was co-promoted by Hyderabad-based entrepreneur Vankayalapti Umesh, who had been an executive with Air Deccan and Kingfisher Airlines, and the airline had the backing of 20 investors. Turbo Megha Airways Private Limited was incorporated on March 14, 2013.
TruJet was the fourth home-grown, low-cost airline to take to the Indian skies from the south after Air Deccan, Kingfisher Airlines and Paramount Airways. All the predecessors of TruJet had, however, had to fold their wings. What was TruJet's plan to buck the trend? It focused on small yet busy routes like Hyderabad-Rajahmundry and Hyderabad-Tirupati, according to a Business Standard article. It also chose to go slow regarding the number of flights between cities. TruJet also focused on small planes and its 72-seater ATR-72s, according to aviation experts, were perfectly suited for the routes on which they flew. A young fleet, better aircraft utilisation and innovative ways to build flyer loyalty were the things that TruJet concentrated on.
In 2014, the promoters of the airline initiated talks to sell the majority stake and Hyderabad-based MEIL showed interest. MEIL holds a 90% stake in the airline. Turbo Megha Airways later adopted the brand name TruJet.
A TruJet plane at the Kolhapur airport. Image courtesy: Twitter/@KolhapurAirport
Turbo Megha Airways got a regional air operator's permit (AOP) from the Directorate General of Civil Aviation (DGCA) in July 2015. According to the then Civil Aviation Minister Ashok Gajapathi Raju, TruJet was allowed to start shuttle services immediately considering the need of pilgrims to attend the Godavari Pushkarams, The Indian Express reported. The airline was looking to link Rajahmundry to Hyderabad and Chennai, according to Raju. TruJet Managing Director V Umesh said the airline looked to cater to the unserved and underserved markets.
In 2017, the airline was granted AOP under the scheduled commuter operator (SCO) category, which gave it the licence to expand to metros of other regions as well, like Mumbai, under the government's Regional Connectivity Scheme-Ude Desh ka Aam Naagrik (RCS-UDAN). Under the SCO category, airlines are allowed to operate aircraft having all up weight (AUW) not exceeding 40 tons. TruJet was the first airline in India to begin operations on all routes under UDAN 1 and 2.
In 2019, TruJet revealed its plans to float an initial public offer (IPO) after three years as it sought to establish itself as a strong niche player connecting Tier 2 and Tier 3 cities and as a major participant in RCS-UDAN, according to a report in The Economic Times. Its fleet size was envisaged to have increased to 18 by FY21. The airline expected to book a net profit in FY20 and its topline (revenue and gross sales) was expected to touch Rs 600 crore by FY22. It also viewed the Northeast as a big area of growth.
However, the airline faced operational challenges with intermittent finding from its promoters, leading to a lack of spares and engines, Business Standard reported, citing industry sources.
According to DGCA data, last year, TruJet carried 3,76,734 passengers and had a passenger load factor (PLF) of 61.7%. The PLF reached a high of 83.4% in February 2020, before Covid-19 started to wreak havoc in India. PLF refers to the percentage of available seating capacity of a plane that is filled. In January and February this year, TruJet carried 45,000 and 48,000 passengers respectively, giving it a market share of 0.6% in both months.
A deal between Interups and MEIL would see the latter's share in TruJet shrink to 51%.
Interups Inc is a US-OTC (over-the-counter) listed organisation and has a market capitalisation of $28 million, according to Moneycontrol. Yet, it has not been able to win a single company in India so far despite bidding for several bankrupt companies like Lavasa Corporation, Asian Colour Coated Steel and Reliance Naval. It had also attempted to take up AirAsia Berhad's 49% stake in AirAsia India for $50 million, but AirAsia India's majority shareholder Tata Sons turned the offer down as it held 'Right of First Refusal' on AirAsia Berhad's stake.
The firm had hoped to partner with a group of Air India employees to gain a 49% stake in the privatisation-bound national carrier. However, Interups withdrew at the last moment, fearing legal trouble due to the presence of another employee-backed consortium, led by Air India's Commercial Director Meenakshi Mallik. Ironically, the Mallik-led consortium was subsequently disqualified from progressing further in the Air India bidding process.
(Cover image courtesy Wikimedia Commons/airliners.net/Atamvir Multani)